Avocado supplies on verge of normalcy

by Tim Linden | November 06, 2017

It has been a long time coming but the supplies of avocados in the U.S. market appear to be approaching a more normal situation, which should result in more promotions and a resumption of the decade-long upward trend for the fruit.

For the first time in more than a 10 years, consumption in the United States declined in a 12-month period straddling 2016-17 as both Mexico and California had decreased supplies. But Mexico appears to be back on track and California is looking at a 2018 crop that could be twice the size of 2017. Add in more volume from Chile and Peru and the opening up of the U.S. market to Colombia and avocado sales in this country could be on the verge of setting another volume record over the next 12 months.

Several packer-shippers commented on these various factors, including Rankin McDaniel Sr. of McDaniel Avocado Co. in Fallbrook, CA. Speaking first of the current situation on Nov. 1, McDaniel expressed optimism that supplies from Mexico would continue to increase moving forward. “Right now our supply of avocados from Mexico appears to be steady going forward. We do think there will be ‘somewhat’ more fruit, with somewhat being in quotes. It does appear that they will need to get more fruit off the trees as they move through their various blooms.”

The longtime avocado veteran said that in the short term Mexico’s packout appears to be skewing toward the smaller sizes, but he anticipates that changing as the season moves forward. “Right now we have an excess of smaller sizes; the mid-range sizes appear to be in balance and on the larger sizes we are in a little bit of a demand-exceeds-supply situation.”

With steady supplies and a pricing structure with a lot of fruit in the $30 ballpark, McDaniel is starting to see retail promotions but would like to see them ramp up a bit faster. He said it appears that a $30 market is the new low and he believes that price does allow for promotions. “Avocados remain an excellent value to consumers when they are in that f.o.b. range, and that still allows plenty of room for aggressive promotions.”

Robb Bertels, vice president of marketing for Mission Produce Inc. in Oxnard, CA, also was encouraged by the recent increase in supplies. “Supplies of avocados from Mexico have finally loosened up,” he said. “It’s been tight since July, but we are starting to get some volume. We should see consistent supplies for the rest of the calendar year.”

It is the consistency of supply that Bertels said is key to retail promotions. He said the supply has been inconsistent, which makes it very difficult for retailers to promote. “What retail wants and needs is consistency and trust,” he said, adding that retailers are reluctant to go out a promotional limb, unless they can count on the supply and the f.o.b. price several weeks down the road.

“I think we are going to see volume in the high 30s (38/39 million per week) for the foreseeable future. When the season is over, Mexico will have shipped about 1.8 billion pounds to the United States, which is up from this last year’s total of about 1.65 billion. It’s been a slow start to the year [July 1-June 30 fiscal year] but we appear to be back on track.”

Rob Wedin, vice president of fresh sales and marketing for Calavo Growers Inc. in Santa Paula, CA, expects Mexico to export to the United States, on average, 39 to 40 million pounds per week to orderly market what growers have on their trees. He said increased shipments in October did cause the price to adjust downward, but he said it is still a fairly strong market. He compares the 2017-18 crop to the 2015-16 season. When making a direct comparison, he said it “feels like we are a little behind.”

Wedin said volume does need to pick up with many weeks above 40 million pounds if the total crop is to be marketed. The Calavo executive said that the current marketing situation is good. Retailers are getting on board, he said, adding that they promote when confident. They are confident right now, he said, because prices are reasonable and volume is good. He believes there will be some aggressive promotions before the end of the year, but also believes that January will be a very strong promotional month as retailers gear up for the Super Bowl on Feb. 4.

All three shippers pointed to Chile as an important factor in the September to November time frame as they kept supplies at a reasonable level making up for some shortfalls from Mexico. Chile is doing well, Wedin said, but their volume typically starts to dip in November and that should be the case again this year.

In late October, Bertels said Chile is still coming in with 2-3 million pounds per week and should remain that way through the month. He added that those avocados are all on programs and not on the spot market. But they still help alleviate pressure on the spot market price.

On the horizon is the California crop for 2018. Bertels believes that some California growers will begin picking their fruit in January and February. He believes that 400 million pound estimate might be at the top end of the potential. “There were strong winds and we still have winter in front of us, so we expect a 350-400 million pound crop,” he said in late October.

McDaniel said that there is traditionally an October “drop” as the trees adjust to the size of the crop. When the trees are loaded, as they are this season, the drop can be significant. He said in late November the fieldmen for his company will have assessed that drop on their trees and have a more educated guess as to whether the early 400 million pound estimate needs to be adjusted.